Refinancing At The Time Of Variable Rate Mortgage Adjustment
Variable rate mortgages, also known as adjustable rate mortgages (ARMs) have a single
defining idea behind their design and execution: they reflect the actual value of money at the time when the rate is adjusted. These rates are determined by an overall financial index that continually fluctuates over time. It's this fluctuating monetary index that determines whether the interest rate you got, when you first received your variable rate mortgage, will rise or fall once the pre-determined time has come for the loan to be adjusted.
Variable rate mortgages can offer borrowers a loan with a much lower monthly payment, at first, if the loan is taken out at a time when the actual value of money makes the present fixed interest rates seem high. However, since the index of monetary values is constantly fluctuating, it can lead to trouble if payments rise at the time of periodic adjustments.
The Federal Housing Administration (or FHA) has designed a program called the FHA Secure Initiative. This program was launched to allow homeowners and lenders to refinance and renegotiate mortgages. Sometimes, when the variable rate mortgage is adjusted, there comes a new risk that a borrower might no longer be able to satisfy the new terms of the mortgage. In other cases, some loans are already delinquent.
If you are in either of these positions, the best thing for you to do is to consult a mortgage expert. They will be able to analyze your payment history, your mortgage terms, and the present status of the market in order to advise you as to whether or not you should consider refinancing.
In conclusion, the best time to refinance a mortgage is when your variable rate mortgage is being adjusted. However, it's not always the best thing to do. As recent years have shown us, some profiteers will take advantage, offering loans that are too good to be true during these readjustment cycles. That being said, there are plenty of sub-prime mortgage programs and ARM products which present distinct advantages to the borrower.
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